The persistent decline in foreign direct investment (FDI) is beginning to cast a shadow over Bangladesh’s economic landscape, with the country facing growing external imbalances despite multipronged efforts to bolster foreign exchange reserves.
Political unrest since the start of the current financial year has further eroded investor confidence, compounding the country’s economic woes.
Many foreign investors now view a democratically elected and politically stable government as a prerequisite for creating a conducive investment environment.
Sector insiders stress the urgency of addressing this concern to reverse the downward trend in FDI.
According to media reports, net FDI inflows in the first eight months of the 2024–25 fiscal year amounted to $824 million—down from $1.032 billion during the same period in the previous year.
This represents a year-on-year drop of 20.15%.
On an annual basis, net FDI in 2024 was the lowest in five years.
Analysts attribute this decline to a combination of political instability, economic crisis, a lingering dollar shortage, and deteriorating law and order.
The absence of a favourable business climate has particularly deterred new foreign investors.
Khandaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), stressed the importance of improving infrastructure as well as ensuring reliable gas and electricity supply—especially within special economic zones.
“Foreign investors must be able to repatriate their profits. Without this, they will be discouraged. Above all, we must urgently move towards establishing a democratic government,” he said.
Bangladesh Bank data show that net FDI stood at $1.57 billion in 2021 and has since declined each year. Revised data following the BMP6 manual confirm 2024 recorded the lowest FDI since 2020.
Of the total FDI received in 2024, $622 million—or nearly 49%—came from reinvested earnings. Equity capital accounted for $545 million, while intra-company loans contributed $104 million.
Sector-wise, banking attracted the highest investment in 2024 at $416 million, followed closely by textiles and garments at $407 million. The pharmaceuticals, chemicals, energy, and food sectors also saw notable inflows.
In April, the Bangladesh Investment Development Authority (BIDA) and the Bangladesh Economic Zones Authority (BEZA) jointly hosted the "Bangladesh Investment Summit 2025".
According to Executive Chairman Chowdhury Ashiq Mahmud bin Harun, the summit welcomed 415 foreign delegates from 50 countries and sent a positive signal about the country’s investment potential.
Still, domestic sentiment remains bleak.
“Are we doing well? Clearly, we are not. So why would foreign investors come here?” asked Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
“They will first look at how we are faring.”
Economist Dr Mustafizur Rahman echoed this concern, stating that FDI has dwindled to a trickle. “Only a negligible amount is coming in. Investment dropped by $208 million over the last eight months. The decline seen from July to February is largely political,” he noted.
He warned that recent attacks and damages to foreign-owned firms have sent alarming signals to investors. “Zero tolerance must be enforced in such cases to rebuild confidence,” he urged.
“Many investors still perceive the situation as unstable and uncertain,” he added.
“A political government could restore stability. But preparations for future investment must begin now.”
